Is a simple ira the same as a traditional ira?

[DawnC]

Both plans allow for deferment of income tax on amounts contributed to the plans until they are dispersed, as well as on any earnings as long as they remain in the plans. But there are some key differences between the two plans.

A traditional IRA is set up by an individual on their own behalf to save for retirement, whereas a SIMPLE IRA is set up by a small business owner on behalf of an employee (including the owner if he or she is a sole proprietor).   Only the owner of a traditional IRA makes contributions to the account, whereas both the employee and the employer make contributions to a SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees.   

To contribute to a traditional IRA requires only having earned income during the year.   By contrast, small business owners who open SIMPLE IRAs for their employees may make additional stipulations about who can participate.

SIMPLE IRAs have much higher contribution limits than traditional IRAs, allowing you to save more in taxes upfront.   

The contribution limits are also different:

• For traditional IRAs, the maximum allowable contribution in 2020 is the smaller of $6,000 (or $7,000 for those 50 and older) or total income for the year.  
• With a SIMPLE IRA, an employee may contribute up to $13,500 per year in 2020.  For those who are 50 years or older, the IRS catch-up provision allows an additional $3,000 for a total of $16,500 maximum contribution for 2020.   
• The SIMPLE IRA contributions can be either matched dollar for dollar by the employer, up to 3% of the employee’s compensation—or the employer’s contribution can be a fixed amount of 2% of the employee’s compensation.

[dmertz]

A SIMPLE IRA is a type of traditional IRA provided by your employer.  If TurboTax asks any general questions about your traditional IRAs, you must include the SIMPLE IRA.

[JBobka]

Regarding IRAs, TurboTax only asks if I contribute to a Traditional IRA or a Roth IRA. I have a SIMPLE IRA through my employer, so do I check the Traditional IRA box on TurboTax??

[dmertz]

You should check the traditional IRA box because the SIMPLE IRA is a type of traditional IRA, but you do not report in this section any contributions you made to the SIMPLE IRA.  Enter amounts shown in box 12 of your W-2 (with code S for a SIMPLE IRA salary deferral) only in box 12 of TurboTax's W-2 form, nowhere else in TurboTax.

[mcad006]

I saw that someone had responded that if you have a Simple IRA, you would include the Box 12a amount on the W2 form into the Traditional IRA section on TurboTax field, correct? If you have an amount on W-2 Box 12, you cannot put "0" zero in the Traditional Contribution field in TurboTax? Can you please confirm and elaborate this portion of the tax process on TurboTax...?

[BillM223]

First, it would be reported in either box 12a, 12b, 12c, or 12d. All four boxes for line 12 on the W-2 are the same - what matters is the code next to the dollar amount: DD, D, W, C, etc. The code indicates what the dollar amount refers to, not the a, b, c, or d.

Second, when a contribution to a SIMPLE retirement account is done by income deferral (i.e., salary reduction), then, yes, box 12 (any one of the boxes) has an S and the dollar amount removed from income and sent to the SIMPLE account by the employer.

Third, you are correct, if you have an S in box 12 of your W-2, then you don't enter this elsewhere in TurboTax as a contribution to a traditional IRA. As the Learn More in TurboTax says, "A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA." Generally, in TurboTax, you enter each number just once, and once done, you don't need to enter it anywhere else.

As for entering zero in the Traditional Contribution field, I don't know why you can't. What are you trying to do?

@mcad006